Poor to pay price of US deficit
Bush proposes to halve overspend by 2008 with reductions in welfare and education
David Teather in New York and Larry Elliott
Tuesday February 8, 2005
The Guardian
Sweeping cuts in welfare, education and housing programmes for the poor were the centrepiece of austerity budget proposals announced by George Bush yesterday to meet his campaign pledge of halving the US budget deficit in his second term.
In a package hailed by the White House as the toughest since the days of Ronald Reagan in the 1980s, only defence and homeland security were spared from the fiscal squeeze.
The dollar rose on the foreign exchanges as Mr Bush responded to growing concern on Wall Street at the deteriorating budgetary position with a package that he said would cut the deficit from more than $500bn (£270bn) in 2004 to $251bn by 2008.
Critics said that Mr Bush had used an inflated initial estimate of the deficit in 2004 to make the reduction by 2008 look bigger. They added that the deficit projections excluded the $80bn cost of military action in Iraq and Afghanistan, the transitional costs of privatising America's pension system, and of making the tax cuts in Mr Bush's first term permanent.
Democrats attacked the cuts in spending on welfare, housing, education and the environment and, despite Republican control of the Senate and the House of Representatives, the proposals are expected to have a tough passage through Congress. Senate Democratic leader Harry Reid said the "cuts in veterans' programmes, healthcare and education reflect the wrong priorities".
Mr Bush inherited a surplus from the Clinton administration but an economic downturn, huge tax cuts aimed at the wealthiest Americans during his first term and the war in Iraq have left the administration deep in the red.
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The spending document presented yesterday projects a deficit of $437bn this year, and proposes to respond by eliminating or scaling back 150 government programmes. The Pentagon will receive a 5% increase to $419.3bn in 2006, while spending on homeland security to prevent a repetition of the 2001 terrorist attacks will rise by 7%.
The cuts include $1.1bn from the food stamps programme which helps the poorest people in the US buy groceries. The plan also includes squeezing Medicaid, the scheme that provides healthcare for the poor, and cuts in drug subsidies aimed at veterans. Education programmes facing the axe include some aimed at anti-drug efforts and literacy.
The department for housing and urban development is facing some of the biggest cuts. Mr Bush has proposed a $3.7bn reduction in spending, 11.5% of the agency's budget, with programmes targeted including housing grants for the disabled, Aids patients and urban renewal schemes.
Another $500m is being trimmed from the environmental protection agency, almost 6% of its budget.
Subsidies would end for the Amtrak passenger rail network, leaving America's trains facing a desperate future. Mr Bush also plans to reduce the subsidies paid to farmers, a decision that will squarely hit the president's political base.
"It's a budget that sets priorities," Mr Bush said. "It's a budget that reduces and eliminates redundancy. It's a budget that's a lean budget."
Although the total budget for 2006 was put at $2.58 trillion, overall discretionary spending outside national security would be reduced by 0.7%.
Mr Bush has asked for $3bn for the millennium challenge account, less than the $5bn he had promised for the programme designed to provide aid for poor nations in return for political reform.
guardian.co.uk |
